Monday, October 10, 2005

Talk Flat (II)

On a more technical mode, I would like to redirect the readers to two papers recently published dealing with issue of progression in taxation. With the hype of flat tax this discussion becomes more important. The papers published by UCLA Law Review relate to a recent symposium on Rethinking Redistribution: Tax Policy in an Era of Rising Inequality (see

The first paper from Richard Bird (Toronto, Rotman School of Management) & Eric M. Zolt (UCLA), deals with Redistribution via Taxation: A New Perspective for Developing Countries

Inequality has increased in recent years in both developed and developing countries. Tax experts, like others, have focused on how taxes may reduce the inequality of income and wealth. In developed countries, the income tax, especially the personal income tax, has long been viewed as the primary instrument for redistributing income. This Article examines whether it make sense for developing countries to rely on personal income taxes to redistribute income. We think not, for three reasons. First, the personal income tax has done little, if anything, to reduce inequality in many developing countries. Second, it is not costless to pretend to have a progressive personal income tax system. Third, opportunity costs also exist from relying on taxes for redistributive purposes. If countries want to use the fiscal system to reduce poverty or reduce inequality, they need to look elsewhere.

This Article begins with some initial reflections on the redistributive role of the tax system. It then considers the relative success of developed and developing countries in using tax systems to redistribute income. Finally, This Article examines some alternatives in reforming the personal income tax, as well as options available to developing countries in designing and implementing more progressive fiscal systems. View

In the second paper, Marjorie Kornhauser (Tulane) discusses the issue of Choosing a Tax Rate Structure in the Face of Disagreement

The “case” for a progressive tax rate structure may be “uneasy,” as Walter Blum and Harry Kalven so famously proclaimed half a century ago, but so is the case for a flat tax. 1 Both scholars and the general populace disagree as to whether the ideal rate structure is flat (proportionate) or progressive (graduated). The debate about the proper rate structure is so long standing and intense that no analysis, no matter how strong, will end it. Given the inevitability of disagreement, the question becomes not how to end the debate but how to act in light of it. This Essay proposes both the method Congress should use to make its decision and what the ultimate decision should be. First, it suggests that in the face of inescapable conflict, Congress should make its decision based on an Integrity Principle, derived from, but not identical to, the principle of integrity developed in Ronald Dworkin’s LAW’S EMPIRE. 2 Next, it states that under an Integrity Principle progressive taxation is the correct choice for three basic reasons. 3 First, progressivity best comports with the economic reality of how wealth and income are produced and acquired in society. Second, progressivity best reconciles the two basic, but often conflicting principles of equality and liberty. Third, progressivity best promotes the state’s legitimacy.


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